Real Estate Investing for Beginners With No Money

By the definition given above, we can see that real estate property pertains to everything a plot of land can offer, including air and underground rights. Although real estate is the property of a person, it is not considered personal property. The two might seem to be synonymous with personal property; the two are in no way the same.

Personal property is any movable property owned by an individual. It can be anything from a vehicle to furniture to appliances to jewelry and even livestock on a farm. A real estate property’s immobility is what differentiates it from personal property. 

Types of Real Estate

Real estate properties are divided into the following three categories: 

1. Residential Real Estate. It is the type of property that is mainly used as dwelling places and residences. It includes single-family homes, multi-family properties, condominiums, townhouses, tiny houses, and other similar properties.
2. Commercial Real Estate. It is where most business and commercial establishments are found, such as shopping complexes, office spaces, restaurants, hotels, apartments with four or more rental units, and other similar workplaces.
3. Industrial Real Estate. It is where most manufacturing and production of goods take place, like factories, warehouses, plants, and shipment facilities, among others. 

The real estate industry plays a key role in our economy because it contributes between 6% and 7% to the nation’s GDP. On top of that, the industry produces hundreds of thousands of jobs in construction, development, and even businesses involved in its supply chain. The health of the real estate industry exerts a direct effect on a community’s socio-economic status. 

Real estate is also a necessity as it provides people shelter to live in and workplaces to make a living. Thus, the demand for real estate properties will never go away, especially now that it is steadily recovering from the impact it suffered from the pandemic’s onset. Although it slowed down in the first year of COVID-19, the demand is on a continuous upward trend again. Industry insiders and experts all agree that the real estate sector will continue to give a strong performance throughout 2022. The ever increasing demand for property along with a shortage in inventory means prices will continue to go up at a greater rate than home sales growth. 

That being said, gaining a better understanding of the real estate sector’s importance and workings helps motivate aspiring but hesitant entrepreneurs and investors to take action and invest in it. 

Related: The Impact of COVID-19 on Real Estate Investors

The Benefits and Risks of Investing in Real Estate

Given real estate’s importance to our society and economy, many people are seriously considering getting involved. But just like any investment or business venture, certain rewards and risks go with the territory. 

Here are some pros and cons a real estate investor will face, regardless if it’s real estate investing for beginners with no money or ones who are stacked with cash:

The Pros

Here are the benefits of investing in real estate:

Additional Income Source

Investing in real estate is an excellent way to add another income source to your financial standing. It offers excellent potential for generating a positive cash flow enough to make a passive income out of it. It will, of course, depend on your investment strategy but it is undoubtedly one of the most rewarding investment types there is. 

Portfolio Diversification

One advantage of real estate investment is that it allows individuals to diversify their investment portfolios. One of the simplest yet most important tips for real estate investing for beginners with no money (or with very little of it) is to diversify their investments and not put all their eggs in one basket. 

It is a safe investment compared to other asset types, like stocks and bonds, because it is not correlated with the movements and trends of the stock market. Its value depends on the simple law of supply and demand. And the demand for real estate will always be there.

Hedge Against Inflation

Because it is a much more stable investment type, an investment property is an excellent way to mitigate the effects of inflation. The concept is simple. As inflation rises, so do property prices. As property values go up, rental property owners can adjust their rates accordingly. The adjusted rates allow rental property investors to keep pace with inflation as it goes up. 

Market Value Appreciation

The most attractive thing about real estate investing is how it appreciates as time goes by. Generally, almost all properties increase in value over the years. 

For instance, the median property value in Houston back in January 2022 was $589,758, with each square foot costing $299.03. After a few months, the median property price of houses in Houston went up to $594,341, with an average per-square-foot price of $258. 

And that’s only a few months’ difference. Just think of how much property values can go up in three, five, or ten years. 

Tax Breaks and Deductions

Folks wondering about how to get into real estate also think about tax issues since real estate taxes are different from the typical income taxes most people are faced with. The good thing about owning an investment property is you can use it to lower your tax payments and get some deductions and tax breaks. To take advantage of these breaks and deductions, make sure to consult with a tax professional to get a better understanding of how real estate taxes work. 

The Cons

Along with the benefits, here are the drawbacks of real estate investing:

Involves Hands-On Approach

Real estate investing isn’t all sunshine and roses; it will require a greater amount of attention from an investor. Even if we’re talking about real estate investing for beginners with no money, the same principles apply. An investor needs to be more hands-on with a real estate investment, whether it’s a fix-and-flip, wholesale, or rental property. 

Income Is Not Fixed

The amount of money made off of real estate properties is variable. It will significantly depend on the investment strategy adopted by the investor as well as a few other factors such as seasonality, tourism, occupancy, and local economic conditions in the case of rental properties. Even If an investor decides to go with a traditional rental strategy, there will be seasons when their property will be vacant. 

High Maintenance

As we already mentioned earlier, depending on the investment strategy, investors might need to put a little more effort into managing their properties, especially if they go the rental route. They need to ensure that the house is in excellent condition and ready for tenancy anytime.

If the investor decides to go into house flipping, home improvements will also eat up a lot of their time and money. Although some investment strategies like microflipping and REITs don’t require as much attention, generally, real estate investing is high maintenance. 

Not Liquid

Unlike other asset classes, most real estate investments aren’t liquid. It means that it cannot be easily converted into cold hard cash when there is an urgent need for it. It will take time to sell a property if an investor intends to at least break even on the initial investment. Desperation will lead to huge losses on the investment as most desperate sellers are willing to let go of their properties for way below market value or their original purchase price. 

Limitations Brought About by Rent Control Laws

Owning rental properties is an excellent way to build wealth. Starting a rental property business is one of the most common investment strategies property owners take because of its profitability. However, depending on the location, certain rent control laws and legislation can limit a rental property owner’s ability to raise rental prices. Whether you intend to start a long-term traditional or short-term vacation rental business, find out what these regulations are in your area.

Real Estate Investing for Beginners with No Money: Is It Truly Possible?

Now that we’ve discussed the importance of real estate and its upsides and downsides, the question now is this: 

Is real estate investing for beginners with no money possible? Are there feasible ways how to buy a house with no money?

Yes and no, depending on how you define “no money.” 

Typically, it takes money to make money. It is the rule of thumb in investing. We’ve already established how expensive real estate investing is and how it is almost always an industry meant to be ruled by the wealthy. So if we talk about investing in real estate with absolutely zero cash output, then no. However, there are a few exceptions to that rule.

The good news is that real estate investing’s become more accessible to people of average income status as there are several inexpensive ways to get into the game. Even if you only got $1,000 to spare, an aspiring investor can easily invest in real estate, thanks to the available investment vehicles. 

9 Ways Beginner Investors Can Get Into Real Estate Investing With Very Little or No Money

For those of you who are wondering how to invest in real estate with no money, here are a few very affordable options to consider: 

1. House Hacking

House hacking is, perhaps, the most inexpensive way to make money off of real estate without spending too much of it. If you’re a homeowner and there’s considerable space on your property that can be rented out, you can start making a business out of it by renting out that space. 

2. Master Leases and Other Lease Options

Newbie investors might be surprised to know that they don’t need to buy a house to make money in real estate. Instead, they can just rent one and sublease extra bedrooms. In a way, it is quite similar to house hacking, the only difference being that instead of owning a house, the investor is renting one. 

3. REITs

What used to be an investment vehicle for the rich and wealthy have now been made accessible to regular individuals who wish to build equity and wealth. Investors who don’t have access to hundreds of thousands of dollars can still invest in real estate through REITs. 

Real estate investment trusts, or REITs, have leveled the playing field for everyone. It has made real estate investing within one’s reach since a newbie investor can get in with a minimum of $1,000 in private REITs. Investors also have the ability to buy and sell shares, which makes it more liquid compared to other real estate investments. 

Is real estate investment trusts a good career path? If we’re talking about real estate investing for beginners with no money, it is a very good start to get into real estate. As for making it a career path, it will depend on how smart and brave an investor is if he or she wants to make it the primary real estate investment vehicle. Either way, it still offers lots of potential for a good return on investment. 

4. Real Estate Crowdfunding

Real estate crowdfunding is a lot like REITs as it allows individuals to own some shares of income-generating properties. As the name suggests, an investor gets to pool in their money (typically ranging from $1,000 to $5,000) along with other investors (the crowd). 

The investments can either be used to purchase income properties for sale or as hard money loans to investors looking for financing. 

Investors just need to look for the right platform to make their money work for them. 

Related: Learn and Experience the Power of Real Estate Crowdfunding

5. Airbnb Rentals

Airbnb rentals are a big thing today. It has given tourists and visitors more affordable alternatives to expensive hotels and resorts. If you have a property, you can have it listed on Airbnb or other similar vacation rental platforms and rent it out (or part of it) for shorter periods. 

A lot of investors have benefited from this low-cost way of getting into the real estate investment game.

6. Seller Financing

Although the seller financing method is a bit harder to find compared to the other ones on this list, numerous investors have made their way into the real estate market through seller financing. 

Essentially, the seller becomes the “lender” in that he or she allows the buyer to purchase the property and make periodic payments over a mutually agreed upon period.

Seller financing is a great way of acquiring real estate because the buyer is not bound by any traditional lending requirements from lenders. 

7. Partnerships

Private partnerships or real estate investment groups (REIGs) are another feasible option for investors looking to own actual physical real estate instead of just REIT shares. The partnership method allows groups of investors to buy one or more apartment or condo units through an operating company. The company takes care of the management aspect of the investment for a certain percentage on monthly rent which frees the investors of any time-consuming property management concerns. 

8. BRRRR Method

Buy. Remodel. Rent. Refinance. Repeat.

The BRRRRR method has been used by a lot of successful investors who initially didn’t have enough money to buy brand new properties. The trick to making the strategy is looking for undervalued properties to develop. It’s just like house flipping because of the buy and remodel aspects of it, but unlike fix-and-flips, investors keep the properties to grow their rental portfolio. 

The refinance part allows investors to refinance and pull out their cash to purchase other investment properties. 

9. Bird Dog

For those with very little to zero money to buy or invest, becoming an investor’s bird dog may be your key to getting into real estate investing. 

The term bird dog refers to a dog used to sniff out and point to a game for hunters. Similarly, real estate bird dogs sniff out good deals and point house-hunters in the right direction. It is somewhat a specialized real estate agent role, so if you want to legally earn finder’s fees, you will need a real estate license.

All you need to do is focus on investors and lead them to profitable investment properties.

How Much Money Is Needed to Get Started on a Real Estate Investment?

While investing in real estate with absolutely no money is very unrealistic―again, it takes money to make money―it is possible to get into it without spending hundreds or even tens of thousands of dollars. 

As we mentioned in the list above, the average person can invest as little as $1,000 in REITs to get access to the commercial real estate market. Homeowners with plenty of space can rent out a room to boarders or develop their properties and get them listed on Airbnb. Some even take the Airbnb arbitrage route to make extra money as tenants themselves. 

It just takes a little creativity and lots of research to find the best and most affordable way to get into real estate investing. 

Related: Buying Rental Property With No Money Down: 10 Ways It’s Possible

Mashvisor: The Right Real Estate Investment Tool for Beginners

When it comes to finding the best real estate deals, especially where rental properties are involved, Mashvisor is the way to go.

Mashvisor is a real estate website that helps investors spot real estate deals that are right up their alley. It maintains a massive database that covers almost all real estate markets in the US, which is perfect for those looking for out-of-state investment opportunities. 

The website offers users access to its valuable real estate investment tools like the following:

Property Finder. The Property Finder tool allows users to find almost any residential property listed on the MLS. All you need to do is enter the city, neighborhood, or zip code of a location of your choice and you will be shown a list of properties for sale in an area. 

Real Estate Heatmap. The Real Estate Heatmap is used to see how neighborhoods are performing under different filters (median property price, monthly rental income, and cash on cash return). The tool gives an investor greater insight into the market he or she is considering and whether it is worth investing in or not. 

It is easy to find areas that perform very well or very poorly based on the colors shown on the map. The green areas represent the ones that are doing well given certain factors. On the other hand, red ones indicate those that aren’t doing very well.

Mashvisor’s Real Estate Heatmap tool allows investors to find profitable areas for property investments.

Investment Property Calculator. The Investment Property Calculator allows investors to analyze market data and crunch the numbers to come up with highly accurate projections. It is especially helpful in finding the ROI and determining a property’s profitability. 

To learn more about how Mashvisor can help you find lucrative investment properties, schedule a demo.

Wrapping It Up

Real estate investing for beginners with no money is possible as long as you know where to turn to. Several low-cost options do exist. Investors just need to perform their due diligence to find them. Along with the right investment tools like the ones from Mashvisor, getting into real estate with minimal cash output is doable.

To access our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.